Hospitals Go Head-To-Head With Malloy; Running Biggest Media Campaign In More Than 30 Years

HARTFORD — With hospitals facing millions of dollars in state budget cuts, the industry's association has launched its largest media campaign in more than 30 years, using television, radio, newspaper and Internet advertising to try to block the cuts.

The 30-second TV commercial currently playing on Connecticut stations is the latest shot in the high-stakes battle at the state Capitol.

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A mother named Katie from Shelton tells the story of the extensive medical problems of her 2-year-old son, Jaxon, who has had 13 surgeries during his short life. She says she is concerned that her son, who appears on camera, might not be able to get the care he needs if further cuts are made.

With tears in her eyes, she looks at the television camera and says, "Governor Malloy, please reconsider what you're doing with these cuts. We need you to help fight with us. We need help, but not cuts."

The ongoing clash between the hospitals and Malloy has spilled into the general public through the ad campaign that has been running for the past month. The Connecticut Hospital Association has also created a website called StopTheCutsNow.org that contains the commercial and collections of data that it says supports the hospitals' point of view.

Malloy, for his part, has repeatedly complained about bloated salaries and benefits for hospital chief executive officers, which can be as high as $3.5 million per year. He says the big picture is that hospitals are trying to get at least $500 million more from the state in reimbursements and potentially as much as $1 billion.

"So now they've put their cards on the table and they want to pick the pockets of the people of Connecticut for a billion bucks," Malloy said in an interview Tuesday night.

In a recent interview with The Courant's editorial board, Malloy disputed hospitals' complaints about overtaxation, saying that 39 states impose taxes on hospitals and 44 states tax nursing homes.

"This idea that we're treating hospitals different than other states is not true," Malloy said.

Malloy told the story of his mother, Agnes, a longtime nurse who served on the auxiliary of St. Joseph's Hospital in Stamford during a time when hospitals had numerous volunteers for all kinds of tasks. Those days are over, Malloy said, arguing that this is an era of high salaries and corporate mergers, even as the hospitals operate what Malloy called "supposed not-for-profit institutions" across the state.

"The business of pretending that you're not in business is a good business to be in," Malloy told the editorial board.

Malloy noted that the CEO at the Eastern Connecticut Health Network, which operates hospitals in Manchester and Rockville, received a 41 percent pay increase at a time when the network had hiring freezes and layoffs.

But the hospitals say Malloy is treating them differently than they're treated in other states.

Stephen A. Frayne, a senior vice president and 31-year hospital association employee, agreed that other states tax the hospitals, but those states eventually return the money to the hospitals in a complicated system in order to get federal reimbursements. Connecticut does not return all the money to the hospitals, he said, adding that if Malloy's rescissions are fully implemented, the shortfall to the hospitals would be more than $500 million.

"Every other state in the country seems to be able to address this," Frayne said in an interview Tuesday.

Legislators and Malloy have been negotiating in closed-door talks for weeks to close the state's budget deficit as lawmakers seek to reduce the hospital cuts. They are trying to close a deficit that they estimate at $350 million for the current fiscal year and that is projected at $552 million next year. The talks are scheduled to continue Wednesday.

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Frayne said Malloy's concern about CEO compensation should, instead, be focused on the millions of dollars in cuts that impact nurses and other lower-paid workers. Overall, 26 hospitals are paying the so-called provider tax.

"It's a standard response for everything that he's done for the last four years," Frayne said. "He says they pay CEOs too much. It is a common refrain from the administration. I think the administration wants to spend a lot of time talking about 26 people, but the issue is we employ 55,000 people. The issue isn't how much does a CEO make."

Frayne said he did not have a detailed explanation on the reasons for the high-profile clash.

"For whatever reason, we find ourselves constantly in the crosshairs of the administration," Frayne said. "We don't know why we keep being put there. We're hoping we could have a more positive working relationship. It's not a place we want to be, but it's not a place we've chosen to be."

He added, "Over the last several years, the problem has been getting worse and worse. Every time we think it can't get worse, it does the next year."

When the smoke clears, Frayne said, hospitals are taxed at an effective rate of 85 percent of net income.

Malloy has countered that the hospitals earned a collective $916 million last year, adding that hospitals have been helped in recent years because far more patients have insurance coverage through the Affordable Care Act. As a result, the hospitals treat fewer patients who have no insurance and cannot afford to pay, the administration says.

Ad campaign

The current advertising campaign covers all major media and includes 60-second radio advertisements, as well as 30- and 60-second TV commercials.

Hospital officials declined to reveal the amount of money being spent on the campaign, although the numbers must eventually be released publicly. Public filings show that the hospital association spent more than $715,000 during the past legislative session, which does not include the current media campaign.

Separately, the Yale New Haven Health System spent nearly $280,000 to lobby against tax increases on hospitals and regulations affecting the mergers and acquisitions by large hospital systems like Yale.

Hospitals ranked third among all lobbying spenders at the Capitol, behind the 10,000-member Connecticut Business & Industry Association, which spent nearly $500,000 on media campaigns out of a total of $1.12 million on lobbying on issues such as corporate taxes and state spending. The second-highest individual spender this year at more than $935,000 was Families for Excellent Schools, a New York-based charter school group that advocated for expanded charter schools.

During his travels around the state over the past month, Malloy said that no one had approached him to talk about the hospital ad campaign.

"I don't even give that a second thought," Malloy said Tuesday night.

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He said the hospital industry has "fat-cat executives" who are trying to obtain more taxpayers' money for the "hospital-industrial complex" in an industry that earned nearly $1 billion last year in Connecticut.

"The hospital association pays its lead executive $800,000 a year," Malloy said. "That person reports to some presidents of hospitals who earn $3 million per year."

He added, "What they're saying is, 'Hey, citizens, we want to raise your taxes.' Do they want to pay more taxes to pay executives of these hospitals more than $3 million apiece? They want to dictate to the people of Connecticut how much profit they get to make for their hospitals."

Potential lawsuit

The hospitals are now taking the first steps toward possibly filing a lawsuit to argue that the tax on hospitals is unconstitutional. The hospitals sent letters to two state agencies this week on "why we think the hospital tax is unconstitutional and why we think it violates the federal Medicaid Act," Frayne said.

The hospitals have contacted the same lawyer who helped win a settlement for hospitals in New Hampshire on the same issue.

"The parallels between Connecticut and New Hampshire are quite significant," Frayne said. "When it started, the hospitals were sure they would have all their tax dollars returned. They, like us, had to go along with that arrangement. They did and we did. They are probably two years ahead of us [in New Hampshire]. Their state had a similar problem, where they didn't have enough money to balance the budget."

He added, "New Hampshire was a little bit ahead of the curve in not having all of the dollars returned back to the hospitals. We're following behind them in not having all of the dollars returned to the hospitals."